Guest Editorial: Minneapolis Fed Vice President and Advisor Preston Miller reflects on homelessness and offers some important considerations and relevant facts about this significant issue.

Editor's note: As readers of The Region know,
the Minneapolis Fed places a premium on economic literacy, the benefits
of which include a better understanding of policy issues and the choices
that societies must make. This guest editorial presents questions relating
to homelessness, and while the Minneapolis Fed has no particular stake
in this issue, we believe this discussion presents a useful framework
for thinking about this problem and, by extension, about other policy
issues that are informed by economic reasoning.

It has always seemed unconscionable to me that in a society as prosperous
as ours, people should go homeless. My impression from stories in the
media was that there are hordes of people in the United States wandering
in the bitter elements, the picture we see so often in Third World countries.
That such a serious problem could persist on such a grand scale not
only offended my personal sensibilities, but also seemed to constitute
a major failing of our free-market economic system.

However, before proposing remedies for any problem, I have
learned one must first understand its dimensions and the nature of the
policy issues involved. It turns out that my initial impression about
homelessness is wrong. Upon some reading and investigation, I find that
being homeless in the United States does not mean being without shelter,
that a relatively modest number of people are homeless at any point in
time and, that while many of the homeless are in serious need of help,
homelessness is not their root problem. My purpose here is neither to
make light of the problem nor to argue that we can do a better job of
addressing it; my purpose is merely to inform, so that others can make
better decisions about the issue.

Doubts about my understanding of the homelessness problem
arose during the winter of 1999-2000. I was living at that time in the
Washington, D.C., metropolitan area. By some accounts, the district experiences
the highest rate of homelessness in the United States. There were some
very cold days that winter; yet, no one was dying from the elements. One
day the newspapers did report that a man had died by freezing, and they
assumed that the man was homeless. It would have been the first time since
1996 that a homeless person had died in the district from freezing. However,
the police discovered that the man lived in a house within a few blocks
of where he was found. Simple logic suggested that if it was possible
to die from freezing, but the homeless were not dying in that way, then
the homeless must have shelter.

That conclusion was reinforced by other observations. As
my wife and I walked our dog along back streets into Old Town Alexandria,
Va., we would pass a nice, fairly new public building that was in part
a shelter. I later learned that people who stayed in such shelters, public
or private, are counted officially as "homeless." According to informed
estimates, a majority of the homeless live in such shelters. In Washington,
D.C., it is estimated that less than 10 percent of the homeless are out
on the streets. So, although society has addressed the problem of homelessness
in part by provision of public and charity-financed shelters, the recipients
of the assistance are still termed "homeless."

However, another observation suggests that many of the
homeless do not wish to stay at shelters. It is commonly reported that
the shelters become very crowded in extremely cold weather. One explanation
for this observation is that a significant number of homeless would rather
sleep in boxcars, abandoned buildings or other unheated places than in
shelters. Then, when it gets very cold, they are forced to go to them
for the heat.

To me, these conclusions, taken together, change the nature
of one homelessness policy issue: It is no longer whether we need to make
more shelter available; it is whether we need to improve the quality of
the shelter that we are providing.

In addition to thinking about the nature of homelessness,
I wondered about its extent. According to the 1990 census, there were
well under 300,000 homeless on any given night. However, critics claimed
the number was closer to 600,000. Based on an Urban Institute study, experts
in the 1990s were taking the number of homeless on any given night to
be in the range of 500,000 to 600,000. Prodded by criticism of the 1990
census survey methods, the Census Bureau made a concerted effort in 2000
to count as many of the homeless as it practically could. Nevertheless,
the survey again tallied under 300,000 who could be considered homeless.
So, if we take 300,000 to 600,000 as the likely range of homeless people
on any given night, that is just 0.1 percent to 0. 2 percent of the civilian
population. To put the number of homeless into perspective, in May 2001,
a month with a historically low unemployment rate, there still were 10
to 20 times more people unemployed than homeless.

Even these relatively modest numbers overstate the homelessness
problem for at least two reasons. One reason is that these numbers refer
to individualsnot families. For example, a family of four could
be housed in a single unit, yet the family would count as four homeless
persons. Surely, since the homeless include children, there are fewer
homeless families than homeless people. Thus, if society chose to house
the homeless, it would not be necessary to provide as many homes as the
number of homeless.

Another reason why the homelessness figures overstate the
problem is that they do not distinguish between those who have short spells
of homelessness from those who experience long spells, and it seems like
the major social concern is with the latter group. An analogy with unemployment
may be helpful. The unemployment rate is a snapshot of a constantly changing
labor market. At any point in time, some individuals leave jobs and others
take jobs. Unemployment in any month includes some people in transition
from one job to the next. The main concern of society is with the people
who have been without jobs for long spells. In May 2001, only 10 percent
of the unemployed were without jobs for over half a year, which means
the long-term unemployed were just 0.5 percent of the civilian labor force.
Similarly, there is good reason to believe that many counted as homeless
are without homes for short spells. They could be between jobs, placed
in a shelter until authorities find them more permanent residence or out
of a home due to some other temporary reason. For the temporary homeless,
shelters may be an adequate form of assistance. For the longer-term homeless,
more permanent shelter may be appropriate.

Of course, one can argue that one homeless person is one
too many. So, a policy issue for local authorities is whether there are
actions they could take to improve the functioning of housing markets
that would make more low-cost housing available. Studies suggest that
by reducing the cost of housing at the lower end, the number of homeless
can also be reduced to some degree.

Although for the most part shelters are available for the
homeless and relatively modest numbers are involved, the problem for a
significant share of the long-term homeless is serious and difficult.
But calling the problem "homelessness" is something of a misnomer. These
new perspectives were driven home by the events in the winter of 2000-2001
in Washington, D.C. In that one winter five homeless people froze to death.
All of the deceased shared some traits: They were all alcoholics, all
had mental problems, all had been coaxed to get shelter and, although
shelter was available, they chose not to take advantage of it. Two were
Central American immigrants who were traumatized by war and were fearful
of institutions. They both died within two to three blocks of a shelter
that targeted homeless Latinos and had about 30 vacancies at the time.
Two others had physical disabilities and were too embarrassed to enter
a group facility. The fifth died in an unheated garage in one of the wealthiest
sections of DC

These tragic cases illustrate how difficult the problem
of homelessness is to remedy for some of the long-term homeless. The fifth
case makes clear that the simple solution of more money is not adequate.
The fifth of the deceased received $5,000 to $10,000 when his guardian
died. He used the money to buy more liquor, and that led to his rapid
decline. But if money is not the solution, what is? How do we treat, assist
and shelter people who resist or refuse aid? When should the freedom of
individuals to choose their style of life be abrogated and replaced with
forced commitment in order to save their lives? These are tough issues.

The homelessness problems I identify are significant. Nevertheless,
they should not be considered evidence of failure of our free-market system.
They also are problems faced in every society, no matter what their economic
systems.